How to Provide Notice of GLB-Related Activities

Detailed below are questions and answers that staff
throughout the Federal Reserve System have considered since the enactment of
the legislation. Please consult your legal counsel before making decisions
related to the Gramm-Leach-Bliley Act.

Permissible Activities

Does the Act authorize FHCs to engage in commercial activities?

The Act does not generally authorize FHCs to engage
in commercial activities. However, the Act authorizes FHCs to engage in
activities with commercial characteristics, such as complementary activities,
merchant banking, and, during a specified divestiture period, a limited amount
of commercial activity by nonbanking companies that become
FHCs.1

In accordance with the Act, in what activities may a financial subsidiary of a national bank engage?

A national bank may own or control a subsidiary that
engages, as principal or agent, in activities that are not permissible for
national banks to engage in directly. National banks may apply with the OCC to
engage in such activities through a "financial subsidiary." A financial
subsidiary of a national bank may engage in all section 4(k) activities except
insurance underwriting, providing or issuing annuities as principal, real
estate investment and development, and merchant banking. 2

Can state member banks engage in activities authorized for financial subsidiaries?

A state member bank may own or control a subsidiary
that engages in activities as principal that would be permissible for a
national bank to conduct through a financial subsidiary, if they comply with
the conditions and limitations applicable to national banks. 3 On
March 10, 2000, the Federal Reserve Board issued an interim rule permitting
qualifying state member banks to establish financial subsidiaries and thereby
engage in activities that have been determined to be financial in nature or
incidental to financial activities. 4

Notices

What notice to the Federal Reserve Board is required for an FHC to engage in activities that are financial in nature?

An FHC that proposes to engage in a section 4(k)
activity, or acquires control or shares of a company engaged in any section
4(k) activity, is required to provide written notice to the appropriate Federal
Reserve Bank within 30 calendar days after the commencement of the activities
or after the acquisition. The notice should describe the activity or identify
the name of the company acquired and describe its activities. The
FR Y-6A and
FR Y-7A will be used for the thirty day post-commencement notice of
activities.

What approval by the Federal Reserve Board is required for an FHC to engage in complementary activities?

An FHC may engage in any nonfinancial activity that
the Federal Reserve Board determines is complementary to financial activities
and does not pose a substantial risk to the safety and soundness of
depository institutions or the financial system. Notice is required 60 days
prior to engaging in complementary activities. 5

What is the divestiture period for impermissible commercial holdings of a nonbanking company that becomes an FHC?

When a nonbanking company predominately engaged in
financial activities becomes an FHC, the organization has up to 10 years to
divest its impermissible commercial holdings. However, the FHC may apply to the
Federal Reserve Board to receive approval for the possibility of a 5-year
extension. 6

How does the Act affect a BHC that does not elect to become an FHC?

Permissible nonbanking activities for BHCs that do
not elect to become FHCs remain the same. BHCs will be limited to engaging in
activities that the Federal Reserve Board has determined to be closely related
to banking under section 4(c)(8) of the BHC Act. 7